THEME: Denmark, borrow more money
Housing refugees and giving them food, schooling, medical services and leisure activities costs money. Which must be found somewhere, and Professor Peter Nannestad has an idea about where to find them. The idea is obvious, but apparently also so controversial that no one has discussed it until now.
"The Good Samaritan wouldn’t be so good if he didn’t have any money to share... "
This is the answer given by professor at the Department of Political Science Peter Nannestad, who is an expert on the impact of refugees and immigrants on the labour market, when asked whether refugees are a resource or an expense.
"Where your level of charity and benevolence lies is something you have to decide for yourself. My view is that it must be decided by the majority in a democracy," says Peter Nannestad.
Yes, it makes sense
He certainly thinks that it makes sense to ask whether refugees are a resource or an expense for a country. Before he gets into the deeper financial consequences of large-scale immigration of non-Western immigrants, he clarifies that there are, of course, refugees who individually add financial value to Danish society.
READ MORE: Bachelor student manning the barricades for refugees
"One of my Master’s thesis students is a refugee. In the long term, she will absolutely add financial value to society. She really has a lot of ability," he says.
Huge costs
The Refugee Debate:
Rarely has an issue been so illuminated - but at the same time, so difficult to take a position on. Denmark - and the rest of Europe - finds itself in a dilemma between human value and compassion on the one hand, and financial consequences and pressure on the welfare state on the other.
Omnibus has asked two of AU’s experts on refugees - Associate Professor in Economics Anna Piil Damm and Professor of Political Science Peter Nannestad, to respond to the question:
Are refugees a resource or an expense. And does it even make sense to ask that question?
The response from the two experts is both a no and a yes.
But both experts have a shared frustration about how difficult it is to introduce factual information into the debate.
The picture is different when Nannestad calculates the general consequences for the Danish economy. Here he does not have difficulty spotting the costs and expenses. In the short term in particular, they’re huge.
"Over a twenty-year period it can be seen that the effect of large-scale immigration in one year is generally a lower GDP growth in the following year," he says.
A boost - when seen in isolation
In his calculations, Nannestad takes into account the fact that society's level of activity increases, because a lot of goods and services have to be bought directly for the refugees. That also gives new jobs, of course. More care workers, health professionals and teachers are a direct consequence, while local shops and skilled workmen also experience increased demand for goods.
"This actually boosts the economy and GDP, when seen in isolation. But virtually no refugees are self-supporting the first year. Society therefore has to pay for everything – food, clothing, housing, language teaching and the entire healthcare service," he says.
Society has to pay this expense. In the western world, we normally make savings elsewhere. Some countries also raise taxes and duties. Regardless of whether countries choose to increase taxes or make savings, the consequences are that the rest of the population and society’s public institutions and businesses see their consumption stagnate.
"The positive effect of the increased demand that refugees create almost disappears before it’s realised when the rest of the population have to give money back, because society increases taxes and duties and makes savings in all kinds of places, so it can pay for the cost of the refugees," he says.
Borrow more money now
Peter Nannestad has an idea about the easiest way for Denmark to get through a period with very large additional expenses for integration.
"The most lenient solution is probably to take out loans to pay all the expenses, because then the positive impact of the increased demand created by the refugees will be maintained in society. Of course, the loan will have to be repaid later," says the professor.
He does not believe, however, that it will be politically possible to find a majority for this solution. In part, because Denmark as a nation does not have a tradition for borrowing money to invest in specific population groups. It is easier to understand that society borrows money to invest in roads, bridges and hospitals.
Seemingly controversial
His point is that if you finance the costs of refugees by borrowing, then at least some of them will have become taxpayers by the time the loan has to be repaid. In this way, the refugees will themselves pay a share of the costs.
READ MORE: What about the long-term view
"The fact that Denmark should loan money to invest in the education and peace of mind of a new, large group of citizens is apparently so controversial, that no one talks about it – at all. No one in the media has taken this up, even though it’s an obvious topic for discussion," says Professor Nannestad.
Burden or benefit?
In the long term, he is confident that the greater the number of former refugees who find jobs, the better integration will work. In his opinion, the fact that currently an average of only fifty per cent of refugees find a job, shows that it makes sense to invest in more education and integration. The question of whether refugees end up being a financial burden or benefit in the long term, ultimately depends on whether they find a job.
Translated by Peter Lambourne
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